British Airways owner IAG looks to short-haul for deals

LONDON (Reuters) - British Airways owner IAG (ICAG.L), which has tried to take over Norwegian Air (NWC.OL), said on Friday it regards the short-haul market as its best opportunity for consolidation.

Chief executive Willie Walsh told investors he expected to see airline consolidation in Europe and that IAG had the financial headroom needed to pursue acquisitions.

"When we talk about consolidation it (Norwegian) is an opportunity, particularly if you look at the short-haul network and further consolidation in that short-haul network, it's probably the best opportunity for us," Walsh said.

Walsh said he had nothing new to report on Norwegian, in which IAG owns a 4 percent stake, and which has rejected two approaches by the owner of BA, Iberia, Aer Lingus and Vueling.

IAG said on Friday most of its financial goals for 2019-2023 were the same as those made in a long-term plan last year.

The group said it was sticking to a target to post an operating profit margin of between 12 and 15 percent. despite a sharp rise in oil prices, as it continues to outperform European rivals Lufthansa (LHAG.DE) and Air France-KLM (AIRF.PA).

Shares in IAG were flat at 619 pence at 1544 GMT, paring early gains of 5 percent.

Liberum analyst Gerald Khoo said it was "positive that the targets have gone up despite a tougher fuel cost environment, but a risk of greater scepticism on delivery as a result."

Jet fuel has risen by more than 30 percent from 12 months ago, the International Air Transport Association (IATA) says.

EARNINGS GROWTH

IAG said average earnings per share would grow more than 12 percent per year from 2019 to 2023, in line with the forecast it made last year.

It also raised its outlook for core annual earnings (EBITAR) to an average forecast of around 7.2 billion euros ($8.2 billion) from 6.5 billion euros.

Those forecasts came after it said last week that for 2018 annual profit would increase by 200 million euros. That compared to Lufthansa's outlook for adjusted earnings (EBIT) this year to show a slight fall from 2017's record.

Air France-KLM has spent the year struggling with costly strikes before finally agreeing a pay deal with unions in October. It has faced competition from low-cost carriers like Ryanair (RYA.I) and easyJet (EZJ.L) but has been unable to overhaul costs and services as IAG and Lufthansa have.

In its outlook, IAG raised its forecast for capital expenditure to 2.6 billion euros a year from 2.1 billion, and said it would grow available seat kilometres, a measure of capacity, by 6 percent a year, up from 5 percent previously.

Walsh said that capacity growth would deliver.

"We're not putting capacity in there because we think there's an opportunity to grow, we're putting capacity in there because we think there's an opportunity to grow profitably."

(Reporting by Sarah Young; Editing by James Davey/Edmund Blair/Alexander Smith)